Funko’s IPO Flops, Worst First-Day Return in 17 Years

Toy manufacturer Funko recently went public. In spite of the popularity of the vinyl pop-culture offerings, the IPO was met with disastrous results.

Funko’s IPO saw the worst first-day return for a Wall Street IPO in 17 years, causing shares to drop a staggering 41% from their initial price of $12 to close at $7.07.

Experts predict that part of the reason behind the incredibly poor debut stems from Funko’s accounting practices, which Bloomberg columnists called the latest example of fun-house accounting on Wall Street.

To make matters worse, the vinyl toy company has accumulated nearly $320 million in debt as of June 30, 2017. Analyst reports indicate that at least $100 million of cash was taken out of the company by Funko’s private equity owners, which contributed to the launch of the IPO to pay down the inflated debt.

Funko must continue getting as many licences as possible when it comes to pop culture figures if they want to succeed. Last year, the company generated $113 billion in total sales, with $425 million in revenue in 2016. Currently, Funko has an impressive catalogue of over 1,000 properties based on pop culture icons and characters.

Taking a look at Funko’s IPO prospectus sheds some light on how efficient the company truly is when it comes to creating toys promptly.

“Our flexible and low-fixed cost production model enables us to go from product design of a figure to the store shelf between 110 and 200 days and can have it on the shelf in as few as 70 days, with a minimal upfront investment for most figures of $5,000 to $7,500 in tooling, molds and internal design costs. Because of the strength of our in-house creative team, we are able to move from product design to pre-selling a new product in as few as 24 hours.”

Funko currently employs 339 people within the United States, and another 126 within the United Kingdom, after their acquisition of the London-based company Underground Toys. The actual manufacturing of the figures is outsourced to countries such as China, Vietnam and Mexico.